What is a creditor

In essence, a creditor is someone who is owed money by a different party, referred to as the debtor. This business arrangement results from a loan, a delivery of goods, or the provision of services.

When talking about debt, the term «creditor» often means the organization that collects the owed money.

If you don’t pay by the due date, you might face extra charges like interest until you pay off the full amount.

Types of creditors

Some creditors, like suppliers, are entitled to specific goods or services, which are often outlined in agreed-upon payment conditions. However, more complex arrangements may exist with banks and credit card companies, necessitating monthly interest payments on top of loan repayments. It’s critical to understand these differences in order for individuals and organizations to handle their financial obligations.

Read also: What are payment terms?